On Thursday, Tesla ( TSLA ) shareholders will find out whether Elon Musk’s record $56 billion pay package will be reinstated after a Delaware judge struck down an earlier one.
“I am voting yes without enthusiasm; I’m voting yes out of principle,” early investor Ibrahim AlHusseini told Yahoo Finance. Personal feelings aside, he said Tesla should honor the 2018 package that was dropped.
“That was the deal. Elon hit the highlights, so he should get his compensation.”
AlHusseini, founder of VC firm FullCycle, invested in the electric vehicle company in a Series C funding round in 2006. AlHusseini said he repeatedly sold most of his position in the decade that followed.
“We took the stock through a trillion-dollar valuation. A lot of wealth was created and his compensation was set by the board,” AlHusseini added, although he thinks most of his peers will vote no this time.
But retail investors currently own about 40% of Tesla’s stock, and Musk claims they support his salary. Last weekend, the billionaire tweeted on X, formerly known as Twitter, that “approximately 90% of retail shareholders who voted” had voted in favor of the package, adding that “public sentiment is unequivocally supportive.”
“Seeing Elon trying to drum up retail enthusiasm on Twitter, I personally find it inappropriate for a half trillion dollar company,” AlHusseini said.
The pay package, made up of options, was originally valued at up to $56 billion, but is now worth about $46 billion due to Tesla’s falling market capitalization. Musk, who currently owns 12.9% of Tesla, will have a 22.4% stake if the package is reinstated.
Major institutional shareholders BlackRock ( BLK ), Vanguard, State Street ( STT ), Geode Capital and Capital Research, which collectively control 17% of the votes, have not publicly announced their decision.
However, Baron Capital, Altimeter and Ark Invest have said they will vote in favour.
On the other hand, Norges Bank Investment Management, Glass Lewis, Institutional Shareholder Services, California Public Employees Retirement System and California State Teachers Retirement System have said the proposed amount qualifies as overcompensation.
Ross Gerber, who co-founded investment firm Gerber Kawasaki, voted yes in 2018 but will go with a no this time.
“I think CEOs should have a lot more incentive-based pay based on the actual performance of the company, not just the stock price,” Gerber told Yahoo Finance. “That’s the point. Elon has every incentive to pump up the stock price, but now that performance has fallen, he hasn’t suffered from it.”
Gerber began investing in Tesla in 2014, and his firm holds 332,000 shares as of March 31.
“For a legitimate business operation, I believe Tesla’s board of directors is the most conflicted, least independent and most incompetent board of directors in business history,” Gerber said. “There is no board of directors that has done more damage to a company. And this pay package is an example of that negligence.”
New York City Comptroller Brad Lander, whose office oversees the city’s public pension funds, is voting against the plan. Earlier this month, Lander wrote an open letter urging other shareholders to also reject the pay package.
“We’ve been raising concerns since 2018 and it’s gotten worse. Two independent board members left the board because they were unable to meet their obligations,” Lander told Yahoo Finance. “You just can’t let a distracted billionaire make his own rules.”
The city’s pension fund owns 3.4 million Tesla shares.
In a letter to shareholders earlier this month, Tesla Chairman Robyn Denholm pleaded with investors to support the pay package because it would encourage Musk to continue to focus on the automaker. Musk also has stakes in X, SpaceX, Neuralink and the Boring Company.
“He already spends more time on his side projects,” AlHusseini said. “Cyber trucks have failed. There are 50,000 cars sitting at Tesla unsold. The only reason the stock is still around $170 is because retail investors are hoping for a long-term robotic AI to save the company.
The shareholders’ meeting will take place on Thursday afternoon. In 2018, Tesla’s board won approval for Musk’s pay package with a 73% vote.
In an overnight tweet, Musk said the measure had the support it needed to pass.
“So the votes are not supposed to be counted and made public,” Lander said. “Some shareholders are still voting ahead of the meeting. It’s just more evidence of the failure of corporate governance at Tesla.”
Tesla shares have fallen more than 30% this year amid sliding margins and car sales. Voting results from mid-cap and retail investors will reveal the strength of Musk’s cult following and what shareholders think about Tesla’s long-term prospects.
Yasmin Khorram is a senior reporter at Yahoo Finance. Follow Yasmin on Twitter/X @YasminKhorram and so on LinkedIn. Send important tips to Yasmin: yasmin.khorram@yahooinc.com
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